Investment Agreement Parties

In most cases, investors in life sciences companies will likely require that they have an entrenched right to appoint a director and that a majority, if not all, of the directors appointed by the investors be present for a board meeting to be a quorum, so that operations can continue. An investor manager can bring his know-how and expertise in the sector. Founders may also have a strong right to appoint a director. In some cases, investors may seek «rights of observation» so that they have the right to send non-directors to attend board meetings and observe board meetings and obtain board documents, but not vote. While board representation can be expected, it can be unwieldy when a company has spent several investment cycles with new institutions that bring together new board members at each round. As the investment agreement regulates the subscription of shares by investors in return for investment funds, the investment agreement should bind all participating investors, including all segregated funds that invest. All existing shareholders (and in particular the founders) and the company should be parties to the agreement, although it is not possible for all minority shareholders to be a party if there are a large number of them. It is customary to have a provision obliging any buyer or any new allocation of shares to contract an act of loyalty which has the effect of treating the new shareholder as if he were an initial part of the investment contract and therefore bound by the provisions of the agreement. There is often a margin of appreciation for the board to waive this requirement and an exclusion for those exercising options. It is typical for closing conditions to be linked to each subsequent investment tranche. This usually implies that guarantees are provided at the closing of a first tranche and sometimes at the closing of subsequent tranches. If, before the closing of a tranche, any of the guarantees given by the guarantors is indeed inaccurate, this gives investors the right to sue the guarantors for breach of the guarantee.

Guarantors may qualify the guarantees by means of a letter of publication and agree in the investment agreement on limitations of the guarantees (e.g. B time limitations, materiality threshold and financial limitations of a right (normally linked to a multiple of his salary for a founder and, for the company, generally to the full value of the investment)). The purpose of restrictive or non-competition agreements is to prevent the founders from competing with the activities of the undertaking during and when they cease to be linked to the undertaking. As a general rule, restrictive covenants are found in both the service contract and the investment contract. However, the restrictive covenants of the investment agreement are generally more enforceable than those of the service agreement, since the founders give the Covenants, as (non-employee) shareholders, partial consideration for the investment. Investors specify that certain conditions must be met before the first tranche of the investment can be completed.. . . .

Comments are closed.